Assessment of options for food safety regulation
Background
ANZFA has sought to quantify where possible, the costs and benefits of the proposed reforms including the potential economic benefits which would accrue from any reduction in the incidence of foodborne disease. As well, qualitative costs and benefits are described.
There is a paucity of quantitative data on the current cost to industry of food regulation, and the degree of reduction of foodborne disease which may be expected as a result of reforming existing regulations. Where Australian data are unavailable, international data have been drawn upon to help assess the regulatory impact of the proposed food safety reforms.
Identification of options
Five options for food safety regulation in Australia were identified:
1 Continue with the current system. Food safety regulations would continue to be developed by individual States and Territories at the expense of a nationally consistent approach.
2 Implement national outcomes-based food safety standards. States and Territories would adopt the food safety standards as described in the previous chapter which contain minimal prescription and require food businesses to adopt food safety programs.
3 Implement nationally consistent prescriptive standards. ANZFA would coordinate development of nationally uniform, prescriptive standards which would describe in detail what food businesses have to do to comply. Food safety programs would not be required.
4 Apply the proposed food safety standards to high risk food businesses only. States and Territories would adopt the food safety standards containing minimal prescription and mandatory food safety programs but apply them only to food business assessed as high risk. Notification requirements would apply to all food businesses so businesses could be identified and changes in risk monitored.
5 Self-regulation and consumer education. The existing food safety regulations would be repealed and no nationally uniform food safety standards would be adopted. The food industry would self-regulate and government would assist in consumer education on foodborne diseases and related health matters.
Option 1: Continue with the current system
Background
Under this option, food safety regulations would continue to be developed by individual States and Territories and a nationally consistent approach would not be adopted.
It is assumed that partially introduced reforms including the requirement for food safety programs recently introduced into Victoria, would continue. In other States and Territories, it is assumed that the current food hygiene regulations would remain in force. It is also recognised that each jurisdiction might choose to reform their current food hygiene regulations over the next few years.
This option also assumes that food businesses which have implemented or intend to implemen t HACC P-based food s afety programs for whatever reason would continue to do so.
Cost to government
As discussed in ‘Cost of food regulation’, the total annual cost to State, Territory and local government of administering and enforcing domestic food hygiene regulations is $47.6 million. Revenue of $29 million is collected annually. In addition to the net cost of $18.6 million, government would continue to face medical and pharmaceutical costs and productivity losses as a result of the estimated 4.2 million cases of foodborne illness every year.
These costs may be reduced if enforcement activities are augmented. The cost of increasing the level of compliance to a more desirable level is estimated at $12.1 million, a total of $59.7 million. Figure 11 shows a comparison of enforcement costs for food safety regulation.
Figure 11 Estimated costs for enforcing current food hygiene regulations and the proposed food safety standards
| Current ($ m ) | Current with additional enforcement ($m) | Proposed food safety standards ($m) |
Total cost | 47.6 | 59.7 | 70.6 |
Revenue | 29.0 | 36.4* | 43.0* |
Net cost | 18.6 | 23.3 | 27.6 |
Note: These figures relate to food hygiene costs only. The total annual cost of food regulation to government was $54 million with a total revenue of $29.6 million.
* These figures are derived by using the current percentage rate of revenue to total costs.
There would be less expenditure by government through staying with the current system and the current level of enforcement. However, the current hygiene regulations are less likely to prevent contamination of food than is Option 2, the proposed food safety standards. Therefore the potential benefit to government, even with increased enforcement of the current hygiene regulations would be less under this option than under Option 2, and would vary between States and Territories depending upon their current food hygiene arrangements and enforcement activities.
A number of State and Territory governments have outdated and inappropriate food hygiene regulations which need reform. Any jurisdiction wishing to update their regulations would have to do so individually, increasing the overall cost to government. Costs of policy development, drafting and communication would have to be met by individual jurisdictions whereas many of these are currently borne by ANZFA in its role of coordinating and drafting a nationally agreed system. These costs are estimated to be $1.6 million for drafting, $4 million for promotion and $0.4 million for advice (KPMG 1998a).
Benefit to government
There are no long-term benefits to government or the community in continuing with a system where 11,500 Australians contract food poisoning every day.
Staying with the current system would obviate the cost to government of introducing the proposed food safety reforms. This is estimated to be $16.7 million as a one-off establishment cost with an annual additional cost of $23 million. Additional cost recovery at the current rate of 61 per cent could reduce this to $9 million per annum.
However, without this investment, none of the savings to the community and reduced regulatory burden on industry would ensue.
Cost to industry
This option would compel the food industry to contend with the inadequacies, prescription and costs of the current food hygiene regulations.Overcooked: A Study of Food Compliance Costs for Small Businessestimated current compliance costs to small business of complying with existing food-related law at $17,407 for the manufacturing sector and $2,216 for the retail sector. The caveats with these data are the small sample size and uncertainty over the proportion of compliance costs specifically related to food safety.
Nevertheless, extrapolation of these figures to an estimated 121,970 small retail businesses and 3,835 small manufacturing businesses results in a total cost of $337 million per annum.
Option 1 would mean retention of prescriptive, out-of-date and inconsistent standards as described in ‘Background’. It is impossible to prescribe for every eventuality through regulations as the food industry is complex and diverse. Option 1 is restrictive and does not encourage industry innovation to develop better or less expensive ways of maintaining food safety.
There are also inconsistencies between State and Territory requirements under this option which can add significant costs to businesses operating in more than one jurisdiction. Similarly it does not align with international requirements or recent domestic changes to legislation for meat and poultry processing. With the global move to outcomes-based food regulation, domestic food suppliers who also export, may be placed at a competitive disadvantage as a result of Australia’s prescriptive regulations.
Overcooked: A Study of Food Compliance Costs for Small Business notes that inconsistency within and between food-related agencies was one of the most frequent causes of burden across all sectors. The report states that, to some extent, large-scale established manufacturers and the import requirements of traditional markets have shaped the detail of food regulation. Some small businesses believe these regulations, which would continue to be endorsed under this option, are inappropriate for small domestic businesses due to their inflexibility and prescriptiveness.
This option has no potential to reduce the incidence of foodborne illness. As such, costs to the food industry as a result of food recalls and withdrawals, business failure, fines, litigation, loss of goodwill and market share would remain high. There would be a continuing loss of consumer confidence in the food supply. Importantly, the current level of foodborne illness has the potential to affect Australia’s export reputation and an important source of revenue.
Australia is a signatory to the WTO Agreement on the Application of Sanitary and Phytosanitary Measures. This agreement obligates Australia to accept the food safety measures of other countries as equivalent to those in Australia if the exporting country can demonstrate that its measures achieve an appropriate level of protection. As a food exporting nation Australia is also obliged to demonstrate that its measures achieve the same level of protection. Option 1 fails to deliver this.
Benefit to industry
Maintaining the status quo can benefit the food industry as no additional effort is required by businesses provided they are already complying with the current regulations. Businesses would not be required to ensure staff have appropriate food safety knowledge nor would they have to keep records of their process controls as part of a food safety program.
Implications for the primary industry sector
Both theFood Standards Codeand State and Territory Food/Health Acts (which are Primary Acts) currently apply to the primary industry sector. Food produced on farms must meet the standards in theFood Standards Codeand where problems are found, such as produce exceeding the MPC of a metal, health authorities can take action to protect public health and safety.
In relation to food hygiene regulations, the primary industry sector is not specifically exempted but instead health authorities leave management of hygiene issues to meat and dairy authorities as appropriate. For other primary industry sectors, health authorities tend not to get involved in enforcing food hygiene regulations unless the farm is engaging in practices such as selling directly to the public, providing ‘home stay’ accommodation or involved in processing ‘in farm’ that leads to a substantial transformation of the product. One exception is the New South Wales Health Department’s involvement in oyster farming.
Under this option, the current arrangements would continue. However, there would be no national consistency and any State or Territory health department could choose to become involved in compliance activities should situations arise where they felt action needed to be taken.
Impact on consumers
Under the current food safety regulatory system, 11,500 consumers contract a foodborne illness every day in Australia. As many such illnesses last 48 hours or longer it is likely that, on any one day, over 20,000 consumers are forced to endure unpleasant symptoms as well as costs associated with medical expenses and time off work.
A significant proportion of these victims are children and their illness causes both emotional suffering for the family as well as forcing some carers themselves, to take time off work. There are also lifestyle costs. Individual and family plans can be disrupted when foodborne illness strikes. Consumers may increasingly rely on litigation to compensate for pain, suffering and monetary loss.
This situation would continue unless resources are allocated to an increased level of enforcement. Similarly, the monetary, emotional, physical and lifestyle costs to consumers would not be reduced. Consumer confidence in the safety of food would be reduced and a loss of diversity of some food products can be expected.
Discussion
Commonwealth, State and Territory health ministers highlighted the failings of the current food hygiene regulatory system in 1995 when they asked ANZFA to develop nationally uniform food safety standards for Australia.
The current system costs government $18.6 million (net) to enforce; and small business $337 million in compliance costs each year. Yet, 11,500 consumers contract foodborne disease every day costing the Australian community over $2.6 billion every year.
This option does not take a preventative approach and is therefore less likely to avoid contamination of food and hence prevent an outbreak of foodborne illness. As such, no decrease in the current incidence or cost of foodborne illness is anticipated. Despite the short-term advantage for government and industry in not having to invest money and time to introduce the proposed reforms, none of the benefits would flow from reduced foodborne illness.
It was assumed that, under this option, food businesses which have implemented or intend to implement HACCP-based food safety programs, for whatever reason, would continue to do so. However, there would be less incentive to do so due to the inconsistent State and Territory regulations.
The effectiveness of Option 1 could be enhanced through allocating additional resources for enforcement activities. In 1995 the Office of Regulation Review identified limited resources as the main constraint on food law enforcement. Adequate enforcement is estimated to require an additional 250 full-time Environmental Health Officers which would cost around $12 million per annum.
Each incident of foodborne illness which is traced to its source has significant costs for the industry and, for more publicised outbreaks, the whole Australian economy. This option is not in keeping with international standards nor with Australia’s WTO obligations to harmonise its SPS measures on as wide a basis as possible with international standards.
There are significant costs and impositions on industry having to comply with the current disparate array of outdated and prescriptive food hygiene regulations. It makes economic sense to aim for a system where contamination and cost imposts are minimised. Option 1 does not achieve this.
In summary, this option to continue with the current regulatory system:
1 does not reduce the incidence of foodborne illness in Australia without additional resources invested in enforcement;
2 does not take a preventative approach to reduce foodborne contamination and instead relies on detection of problems in the marketplace;
3 does not remove the regulatory burden of the current highly prescriptive, outdated and nationally inconsistent food hygiene regulations;
4 does not encourage a business environment that can respond quickly to emerging foodborne pathogens;
5 does not encourage a business environment in which business can take full responsibility for the safety of food produced;
6 does not support export initiatives for Australia to compete more effectively on world food markets; and
7 is not consistent with industry-driven initiatives to rely on food safety programs to ensure food safety.
Option 2: Nationally consistent outcomes-based food safety standards
Background
Under this option, States and Territories would adopt the food safety standards as drafted. The content, rationale and activities underpinning the standards are summarised in ‘Proposed food safety standards’.
In addition to updating, simplifying and removing prescription from current State and Territory food hygiene regulations, the proposed food safety reforms introduce a range of initiatives. They include:
• notification of food businesses;
• food handlers to have skills and knowledge in food safety;
• food businesses to have a food recall strategy;
• food businesses to develop a food safety program;
• auditing; and
• record keeping.
These initiatives have been costed for government and the food industry. The costs to business are principally based on reports by John Hawkless Consultants Pty Ltd (1999) and Heyhoe and Associates (1999). Government costs were estimated by KPMG Management Consultants (1998b).
Each costing has necessitated some assumptions. It is assumed that food businesses which have implemented or intend to implement HACCP-based food safety programs for whatever reason would continue to do so. Costs associated with certain aspects of the standards have not been assessed for larger businesses, almost all of which have already implemented food safety management systems which exceed the requirements of the proposed standards. They therefore have no additional costs under a new regime.
During the six-year implementation of the food safety standards, all businesses which can identify one or more hazards would have to develop and implement a food safety program. A food business which adheres to its food safety program would meet all the requirements relating to food safety practices and food premises and equipment. Hence, the cost of complying with the standards,Food Safety Practices and General RequirementsandFood Premises and Equipmentare equivalent to those of meeting the requirements ofFood Safety Programs. Hawkless and Heyhoe have, between them, costed development and implementation of a food safety program including auditing and record keeping and the recall, notification and skills and knowledge provisions of the standards. Assumptions used by John Hawkless Consultants are at Appendix 1.
Provisions which are merely an update of existing State and Territory food hygiene regulations have not been individually costed. Food businesses by law must already comply with all State and Territory food hygiene regulations. As such businesses should be meeting almost all the provisions of the proposed food safety standards as the outcomes sought are already in the current prescriptive regulations. Some new provisions such as temperature measurement have been quantified (Heyhoe 1999). Quantifying each provision of the proposed standards against the equivalent provision for each State and Territory’s food hygiene regulation is not feasible and has not been attempted.
At this stage the frequency of audit has not been finalised and for this report, an audit frequency of twice a year has been used. It is likely that a number of lower risk businesses would be audited far less frequently while some high risk ones would be audited more often. In addition, audit frequencies for individual businesses may change depending on their compliance history.
Cost to government
As described previously, ANZFA commissioned KPMG Management Consultants to compare the current cost to government of domestic food regulation with the anticipated costs of implementing the food safety reforms.
Of the $54 million currently spent by State, Territory and local government on food regulation, $47.7 million was related to food hygiene. More than half of this cost was apportioned to local government. Revenue raised in some jurisdictions reduced the net cost of food hygiene regulation to government across Australia to $18.6 million. The estimated cost and revenue are summarised in Figure 11.
In relation to Option 2, KPMG estimates there would be a one-off establishment cost to government in the first two years of $16.7 million (see Figure 12).
Figure 12 Estimated (one-off) costs of implementing proposed food safety standards(KPMG 1998a)
Regulatory agency and cost element | $m |
Local governments |
|
Establish notification systems | 6.900* |
Conduct promotional campaigns | 3.750 |
Train Environmental Health Officers | 1.900 |
State and Territory authorities | – |
State and Territory health departments |
|
Policy and legislative change | 1.600 |
Coordinate and implement risk classification scheme | 0.175 |
Conduct publicity and awareness programs | 2.400 |
Total | 16.725 |
* This figure is based on all local governments establishing notification systems. No allowance was made for existing registration or licensing systems which would be acknowledged and not duplicated by the notification system. Consequently the cost would be less than indicated.
The annual figure supersedes the current figure of $47.7 million and is not in addition to it. Hence there is a $22.9 million increase in the annual cost to government as a result of introducing the reforms. However, this does not take into account the lower level of enforcement currently undertaken. During the survey, KPMG discovered that respondents did not consider current levels of enforcement adequate, and to enforce the standards properly would require additional resources. This is in keeping with Nathan (1997) and the 1995 report by the Office of Regulation Review which identified that limited resources are the main constraint on food law enforcement.
It was estimated that an adequate level of enforcement activity would require an additional 250 full-time Environmental Health Officers at a cost of around $12 million per annum. If these officers were employed to enforce the current system the total cost would be $59.7 million. The differential between enforcing current food hygiene laws and enforcing the proposed food safety reforms would then be $10.9 million. A breakdown of the costs to regulatory agencies is provided in Figures 12 and 13.
Figure 13 Estimated annual costs of ongoing administration of proposed food safety standards(KPMG 1998b)
Regulatory agency and cost element | $m p.a. |
State and Territory health departments |
|
Advice to authorities and local governments | 0.400 |
State and Territory authorities | – |
Local governments |
|
Audits of food safety programs | 31.405 |
Site inspections | 27.518 |
Prosecutions | 2.361 |
Operate and maintain notification systems | 8.900* |
Total | 70.584 |
* This figure is based on all local governments establishing notification systems. No allowance was made for existing registration or licensing systems which would be acknowledged and not duplicated by the notification system. Consequently the cost would be less than indicated.
The biggest increase is apportioned to local government. Currently, local government recovers some 61 per cent of its costs. Applying the same rate of cost recovery to the new costs would reduce the impact on local government from $70.2 million to $27.4 million. This is significantly more than the current net cost to local government of $18.1 million. It would be up to individual authorities whether they offset these costs through higher rates of cost recovery.
These costs would not be equally apportioned to local governments across Australia. Isolated and remote, local government areas would be expected to face higher costs than would metropolitan ones. This includes training of local Environmental Health Officers and commuting costs to conduct inspections and audits.
In recognition of the problems confronting rural and isolated authorities, ANZFA is looking at options to help local governments find workable ways to enforce the new requirements. In remote communities it is considered appropriate for the local Environmental Health Officer to provide advice on controlling hazards through a simple food safety program and to audit that program at a later stage.
Nevertheless, additional resources would be critical for isolated local government areas to implement the food safety standards and for Australia to realise the benefits of the reforms through a reduction in foodborne illness.
Benefit to government
There are no Australian data to quantify a reduction in the incidence of foodborne disease which may result from implementing the proposed food safety standards. However, even a small percentage reduction in the incidence of foodborne illness in Australia would result in a significant benefit to the government and the community.
The preventative nature of the standards is expected to reduce the incidence of foodborne illness. There are three key areas where benefits have been demonstrated:
1 improved sanitation by following good food safety practices;
2 implementation of a HACCP-based food safety program; and
3 improved skills and knowledge in food safety and food hygiene.
Improved sanitation, through good food safety practices, has been shown to reduce the incidence of bacteria on food (Robbins and McSwane 1994). Application of HACCP principles in other countries has resulted in lower levels of pathogens in food. In the United States, results from 300 meat and poultry plants have shown that introduction of HACCP has reducedSalmonellalevels on beef by 40 per cent, on pork by 25 per cent and on chicken by 50 per cent (World Food Chemical News 1999).
In Australia, a recent Victorian study indicated that bacterial counts on carcasses at meat works operating a Quality Assurance (QA) system based on HACCP were some 40 per cent lower than in plants not using QA (Sumner 1997). Sumner states that the trial provided the first scientific evidence that comprehensive HACCP-based QA systems led to a more hygienic product than did traditional inspection systems.
While a reduced microbiological load, due to good food safety practices or a HACCP-based food safety program, is likely to reduce the risk of foodborne illness, quantification of the benefits is much more difficult.
As well as introducing food safety programs which are expected to help reduce the incidence of foodborne illness, a key aspect of the proposed reforms is that people undertaking or supervising food operations must have skills and knowledge in food safety matters. This is the first time this has been legislated for in Australia and it is expected to have a dramatic effect on the incidence of foodborne illness. Most food contamination arises through ignorance by food handlers.
Around 60 per cent of foodborne illnesses occurs from time/temperature abuse of food. The focus on competency and temperature requirements of Standard 3.2.2 Food Safety Practices and General Requirements should lead to a marked reduction in foodborne illness. This reduction should continue over time as the commitment to food safety is more widely embraced.
With the reduction in foodborne illness, gradual savings would flow to all sectors of the Australian community. For Commonwealth State and Territory governments, a major benefit would be decreased healthcare and pharmaceutical costs as well as productivity gains.
Cost to industry
Figure 14 provides a breakdown of the costs to business to comply with the proposed food safety standards.
Figure 14 Quantitative compliance costs for all businesses (Hawkless 1999)
Cost elements | Number of businesses | Annual cost $ | One-off cost $ |
Notification 1 | 131,510 | 657,550 | 3,287,750 |
Training | 131,510 | 1,972,650 | 9,863,250 |
Recall recording | 4,247 | 10,851,085 | 0 |
Food safety program | 125,805 | 5,283,810 | 26,419,050 |
Auditing | 125,805 | 31,451,250 | 0 |
Record keeping | 125,805 | 91,837,650 | 0 |
Total | 142,053,995 | 39,570,050 |
|
Average cost for all 131,510 businesses |
| 1,080 | 301 |
1 These are incremental costs to the status quo as described in Appendix 1.
The proposed food safety standards would replace current State and Territory food hygiene regulations. Thus the annual $142 million cost of compliance for business would not be in addition to the costs of complying with current State and Territory food hygiene regulations but would partially replace them. As discussed previously, the total compliance cost to small business of food regulation was estimated at $337 million per annum (Department of Workplace Relations and Small Business 1998). If capital costs are excluded, the current compliance cost is estimated to be $249 million.
A further breakdown of costs was undertaken for small business. These costs are summarised in Figure 15.
Figure 15 Quantitative compliance costs for small businesses
Cost elements | Number of businesses | Annual cost $ | One-off cost in first two years $ |
Notification 1 | 125,805 | 629,025 | 3,145,125 |
Training | 125,805 | 1,887,075 | 9,435,375 |
Recall recording | 1,452 | 3,709,860 | 0 |
Food safety program | 125,805 | 5,283,810 | 26,419,050 |
Auditing | 125,805 | 31,451,250 | 0 |
Record keeping | 125,805 | 91,837,650 | 0 |
Total |
| 134,798,670 | 38,999,550 |
Average cost for all 125,805 businesses |
| 1071 | 310 |
1 These are incremental costs to the status quo as described in Appendix 1.
For many small businesses the extra effort involved in complying with the standards would be minimal. It may include documentation of key aspects of their process controls such as refrigeration and hot storage temperatures to satisfy the requirements for a food safety program. The report by Heyhoe and Associates (1999) identified a range of mechanisms to potentially reduce the cost to small business. These are:
•training—provision needs to be made for full recognition of prior learning in food hygiene, eg that undertaken by apprentice chefs in their TAFE courses. This would ensure businesses do not incur the cost of needless training.
•audit equivalence—every effort needs to be made to have audit equivalence recognised so businesses do not bear the costs (and confusion) of multiple audits. Some small, regional manufacturers and producers currently being audited on behalf of several different organisations give point to this. If one audit was acceptable to all parties, then direct audit charges would be cut by up to 75 per cent, ie from $4,000 a year to $1,000 a year.18 There would be additional savings from reduced management, staff preparation and follow-up time required.
•audit frequency—the frequency of audits should be minimised based on the degree of risk inherent in a business and its track record. For low hazard businesses with no problems evident, a frequency of as little as once a year should be considered.
•industry association activity—industry associations have a significant role to play in reducing the costs of training, auditing and other related services to their members. Industry associations and regional organisations can save their members substantial amounts of money by arranging with auditors and trainers for industry coverage at reduced rates. A similar approach could be used with cleaning and sanitiser chemical suppliers.
•awareness raising—a program could be organised to give key information to businesses, especially small and isolated businesses. Key aspects of the program could include:
costs and availability of training programs;
means of developing a food safety plan and assistance available;
how to select consultants and training providers and what to demand of them; and
availability and means of obtaining industry-specific guidelines.
One way of doing this would be by holding regional seminars and seminars in languages other than English. These could be advertised in regional and ethnic media. An example of awareness raising is the program run earlier this year by the Victorian Meat Authority. This consisted of 17 information sessions for retail meat businesses on the food hygiene strategy. These were held across the state in early to mid-week evenings so as to maximise attendance.
Benefit to industry
There are a range of benefits for industry as a result of adopting this option. For the first time, Australia has the opportunity to have the same food safety laws across the whole country. The current inconsistencies between State and Territory requirements which add significant costs to businesses operating in more than one jurisdiction, would be dispensed with.
At the same time, this option would see removal of prescriptive, out-of-date and inconsistent standards, as described in ‘Background’. It is impossible to prescribe for every eventuality through regulations as the food industry is complex and diverse. In contrast, the proposed standards would encourage industry innovation to develop better and/or less expensive ways of maintaining food safety.
This option aligns with international requirements and recent domestic changes to legislation for meat and poultry processing. With the global move to outcomes-based food regulation, domestic food suppliers who also export, would not be placed at a competitive disadvantage as a result of Australia’s prescriptive regulations.
A saving to small business and business in general is expected to flow from the reforms. Any savings, through more efficient compliance arrangements, would be augmented by better management arrangements and other spin-offs. Introducing food safety management systems can lead to better staff management and delegation of responsibility. In addition, improved stock management has been shown to lead to less wastage of food and less spoilage (McKay 1998).
A study in the United States demonstrated that a meat department in a medium size retail store, showed a 5.3 per cent decrease in product reprocessing loss as a result of implementing a food safety management system (Robbins and McSwane 1994). This paper also cited the Food Marketing Institute assertion that retail meat departments can expect to save about 11 per cent by implementing a preventative food safety management system.
After introducing a food safety management system, including ISO 9000, an Australian seafood company saved over $20,000 a week though better stock management of its product which has a short shelf life.
Implications for the primary industry sector
As previously stated, both the Food Standards Codeand State and Territory Food/Health Acts currently apply to the primary industry sector. Under this option, the primary industry sector would continue to be required to comply with State and Territory legislation and theFood Standards Code.
ANZFA believes all food producers have an obligation to make and sell safe food. The proposed standards were drafted with a view to a ‘paddock to plate’ approach to food safety while avoiding duplication by recognising initiatives in the primary industry sector which achieve an equivalent food safety outcome. This is consistent with the ‘all of food chain approach’ being adopted internationally.
In keeping with the risk-based philosophy of the standards, Standard 3.2.2Food Safety Practices and General Requirementsand Standard 3.2.3 Food Premises and Equipmentwould only apply to primary industry businesses which sell directly to the public, are involved with ‘home stays’ or undertake substantial transformation operations.
In relation to Standard 3.2.1 Food Safety Programs,businesses in the primary industry sector which comply with mandatory statutory standards such as the Australian standards for meat for human consumption are seen to meet the outcomes of the proposed standards. Similarly, independently audited industry schemes which address food safety are seen to meet the outcomes of the proposed standards.
Low risk businesses in the primary industry sector would not have to meet the requirements of the food safety standards. This would be reviewed in 2002.
However, medium and high risk primary industry sector operations which do not have an independently audited food safety program in place would be expected to develop one as the food safety standards are implemented.
In summary, this option would have minimal additional impost on businesses which:
• are already inspected by State or Territory health authorities;
• are low risk operations;
• already comply with independently audited statutory standards; or
• comply with independently audited, industry-driven food safety programs.
Impact on consumers
This option is a preventative approach to food safety based on international best practice which would reduce the incidence of foodborne illness in Australia. There is an obvious benefit to consumers and their families through fewer incidents of food poisoning and its associated cost, stress and inconvenience. The reforms would contribute to consumer confidence that their food supply is safe.
The cost of the reforms to industry is not expected to lead to price increases. While this option sees introduction of new laws, it also sees removal of the disparate array of prescriptive and outdated State and Territory food hygiene regulations. In addition, initial investment by industry to implement food safety programs would see a range of returns as described in ‘Benefit to industry’.
Discussion
Analysis of the proposed food safety reforms identified major savings to the Australian community through reduction in the incidence and the cost of foodborne illness. These savings would flow to all sectors of the Australian community. For Commonwealth State and Territory governments, a major benefit would be decreased health care costs and productivity gains. In contrast, significant additional cost may be borne by local governments charged with enforcing the standards.
The current cost of foodborne disease to the Australian community is estimated to be over $2.6 billion per annum. Figure 16 shows the cost savings to the Australian community of a 5 per cent, 10 per cent or 20 per cent reduction in the cost of foodborne illness.
Figure 16 Potential cost saving to the Australian community from percentage reductions of foodborne illness
Percentage reduction in foodborne illness | Cost saving to the Australian community ($m) |
5 | 130 |
10 | 260 |
20 | 520 |
Consumers would benefit through a reduction in the incidence of foodborne illness, and the cost, stress and inconvenience to them and their families. The reforms support consumer expectation of safe food by reducing concerns about the potential illness from unsafe food and the emotional impact on friends and family from foodborne illness.
Industry would benefit in the longer term through reduction in foodborne illness, its effects on industry sectors and Australia’s reputation as a supplier of safe food. Nevertheless, business would carry the direct costs of any additional record keeping, training, equipment and auditing. Implementation of the reforms would benefit businesses through:
• better stock management leading to less wastage (spoilage);
• improved management through clear delineation of staff responsibilities;
• increased staff understanding and commitment to food safety;
• improved performance within the sector; and
• greater consumer confidence.
Industry also benefits through removal of prescriptive, out-of-date, inconsistent and complex food hygiene regulations. Fewer legislative boundaries would exist and thus experimentation in developing and applying new approaches to food safety is not inhibited. The proposed reforms encourage innovation by industry.
Furthermore, the reforms are in line with international trends. They would enhance the competitiveness of Australian food exports competing on international markets with products that are also promoted as being produced under HACCP-based food safety systems.
In summary, the proposed food safety reforms:
1 would reduce the incidence of foodborne illness in Australia;
2 take a preventative approach to reduce foodborne contamination before it reaches the marketplace;
3 remove the regulatory burden of the current highly prescriptive, outdated and nationally inconsistent food hygiene regulations;
4 encourage a business environment that can respond quickly to emerging foodborne pathogens;
5 encourage a business environment in which business can take full responsibility for the safety of food produced;
6 support export initiatives to enable Australia to compete more effectively on world food markets; and
7 are consistent with industry-driven initiatives to use food safety programs to ensure food safety.
Option 3: Nationally consistent prescriptive food safety standards
Background
Under this option, ANZFA would coordinate development of nationally uniform, prescriptive standards which would describe in detail the food safety measures each food business must undertake. The standards would be based on current State and Territory food hygiene regulations but with outdated requirements removed. Agreement on a common set of prescriptive requirements would allow for national consistency. There would be no requirement to implement a food safety program.
This option has been costed for inclusion and exclusion of notification and food recall requirements, and provisions which relate to food handlers having appropriate skills and knowledge.
Cost to government
As with Option 1, the success of this option is reliant on the level of resources provided by relevant authorities for enforcement. If enforcement activities were increased to an optimal level the additional cost to government compared with the status quo ($47.6 million) would be around $12 million.
If the notification requirement of the proposed food safety reforms was extended to this option, the additional cost to government would be $6.9 millionto implement the system. The estimated annual cost to maintain the system is $8.9 million. Currently registration and licensing raises annual revenue of $17.7 million.
Some additional costs would be expected for Environmental Health Officers to learn about the new requirements. However the prescriptive nature of the standards would make them easier to enforce than auditing food safety programs.
Benefit to government
Unless additional resources are used to ensure compliance with the prescriptive standards, little or no decrease in foodborne illness can be anticipated. With increased enforcement, a reduction in foodborne illness would be expected. However, this option would be less effective in reducing the incidence of foodborne illness than would Option 2. Consequently, there would be a smaller saving to government and the community under this option.
Cost to industry
Under this option businesses would face additional costs complying with national prescriptive regulations when their current premises, equipment and practices differed from the national standard. This may be frustrating to the food industry when their current practices are achieving an equivalent food safety outcome.
If the notification, skills and knowledge, and recall requirements of the proposed food safety reforms was extended to this option, the additional cost to business would be $13.2 million to implement the systems with an annual cost of $12.9 million.
Many food businesses are in the process of introducing HACCP-based food safety programs to meet the requirements of their customers. It is expected that these industry-driven initiatives would continue, irrespective of the regulatory framework imposed by government. Under this option, the food safety outcomes achieved using these programs, may not be recognised by relevant authorities working to prescriptive standards. This would add to the burden on industry.
Benefit to industry
This option would provide for national consistency and be an important step towards nationally consistent interpretation and enforcement of food safety in Australia. Inconsistencies between State and Territory requirements currently add significant costs to businesses operating in more than one jurisdiction.
Removing outdated provisions would also help businesses interpret the standards. Their prescriptive nature should detail exactly what a business should do—from the nature of bench tops, to the height of wall tiles and the temperature of dishwasher water. As such there would be the added advantage of consistent interpretation and enforcement.
Impact on consumers
Without introducing the notification, competency and recall requirements as part of this option, there would be no tangible benefits to consumers unless State and Territory governments allocated increased resources to ensure compliance with the standards.
The standards proposed under this option are not preventative. As such the reduction of foodborne illness would not be as significant as that estimated for the proposed food safety reforms. In comparison with the proposed reforms there would be an increased cost to consumers.
If the prescriptive standards were complemented by addition of the notification, competency and recall requirements, it is expected these would contribute to a reduction of food contamination and hence the number of cases of foodborne illness. These are preventative measures that can reduce foodborne illness. As mentioned, some 60 per cent of foodborne illnesses result from time/temperature abuse. Basic skills and understanding of food safety matters by food handlers would help avoid situations where food is made unsafe through inappropriate storage.
As described previously, the success of this option relies on the level of resources provided by relevant authorities for enforcement. If enforcement activities were increased to an optimal level, the additional cost to government would be around $12 million. Increased compliance activity is expected to result in less foodborne illness and an increased benefit to the community.
Discussion
While the short-term costs associated with this option are significantly lower than those associated with the proposed food safety reforms, long-term savings to the community would be significantly less. The standards proposed under this option are not preventative. As such the reduction of foodborne illness would not be as significant as that estimated for the proposed food safety reforms.
If this option was implemented, many food businesses would still need to develop HACCP-based food safety programs to meet marketplace requirements. If the food safety outcomes achieved using these programs, were not recognised by relevant authorities working to prescriptive standards, there would be an added unnecessary burden to industry.
Prescriptive requirements do not encourage innovation by industry or experimentation in developing and applying new approaches to food safety. In addition, this option is inconsistent with international trends towards preventative standards, which incorporate HACCP. A number of international markets will accept only food which has been prepared in accordance with a HACCP-based food safety program. Prescriptive standards, which do not recognise HACCP-based food safety programs would be an added burden on businesses that supply both domestic and international markets.
In summary, this option for nationally uniform prescriptive standards would:
1 not reduce the incidence of foodborne illness in Australia without additional resources invested in enforcement and inclusion of provisions for notification, competency and food recall;
2 not take a preventative approach to reduce foodborne contamination and would instead rely on detection of problems in the marketplace;
3 remove the regulatory burden of the current outdated and nationally inconsistent food hygiene regulations;
4 not remove prescriptive regulations nor encourage a business environment that can respond quickly to emerging foodborne pathogens;
5 not encourage a business environment in which business can take full responsibility for the safety of food produced;
6 not support export initiatives to enable Australia to compete more effectively on world food markets; and
7 not be consistent with industry-driven initiatives to use food safety programs to ensure food safety.
Option 4: Risk-based application of the food safety standards
Background
Under this option, all States and Territories would implement a range of outcomes-based standards, containing minimal prescription but requiring food safety programs. The standards would apply only to food businesses assessed as high risk. For this option, it is assumed that notification requirements would apply to all food businesses for the purposes of identification and changes in risk category.
The rationale for considering this option is recognition that there are limitations on the resources available to address food safety issues. As such, food safety regulation should operate with maximum efficiency within these resource limitations. In other words, regulatory priorities should be based on risk analysis.
This option uses a risk-based approach whereby the standards are only mandated for certain high risk food industry areas. It requires knowledge of the number of businesses categorised as ‘high risk’ which is imperfect at present.
However, the Victorian food safety legislation has adopted such a risk-based approach. For the purpose of this option, and to give an indication of the impact of such an approach, it is assumed that these high risk businesses represent 25 per cent of all food businesses.19
Cost to government
Applying the food safety standards to high risk businesses only would reduce the annual cost to government from $70.6 million to $17.6 million and the establishment cost from $16.7 million to $4.2 million. Alternatively, lower risk businesses could continue to be regulated under the current system. This would mean the annual cost to government would be $53.4 million.
If notification requirements were to apply to all food businesses for purposes of identification and risk category monitoring, government would face a one-off cost of $6.9 million for implementation and an estimated annual cost of $8.9 million for maintaining the system.
With no tification applying to all f ood businesse s, the ann ual cos t to governmen t of t hi s op tio n would be $24.3 million and the initial cost of $9.4 million. Assuming the same potential level of revenue for notification, the net annual cost to government would be $6.6 million.
Benefit to government
This option has significantly less cost impost on government. One advantage to government of this option is that current resources allocated to enforcement could be targeted entirely at high risk businesses which would save government around $12 million per annum. This would also impact on reduced training costs for government. The reduction in costs to government would be lessened if the remaining 75 per cent of businesses were not excluded and were regulated under the current system.
However, outbreaks of foodborne illness would still emanate from businesses in the medium and low risk categories. As such, reduction in the incidence of foodborne illness is not expected to be as great as that anticipated as a result of introducing the proposed food safety standards. There would be a reduced benefit to government under this option.
Cost to industry
The costs of compliance by business with this option are given in Figure 17.
Figure 17 Quantitative compliance costs for all businesses
Cost elements | Number of businesses | Annual cost $ | One-off cost in first two years $ |
Notification 1 | 131,510 | 657,550 | 3,287,750 |
Training | 32,878 | 493,163 | 2,465,813 |
Recall recording | 1,062 | 2,712,771 | 0 |
Food safety program | 31,451 | 1,320,953 | 6,604,763 |
Auditing | 31,451 | 7,862,813 | 0 |
Record keeping | 31,451 | 22,959,230 | 0 |
Total | 36,006,480 | 12,358,326 |
|
Average cost for all 131,510 businesses | 274 | 94 |
|
1 These are incremental costs to the status quo as discussed in Appendix 1.
While there is an overall reduction in the cost to the food industry under this option, high risk businesses have a significantly higher compliance cost of $1,080 per annum. There may be some disquiet voiced, by businesses and food industry sectors categorised as being high risk, on the grounds of discrimination and the absence of a ‘level playing field’.
Similarly if the remaining 75 per cent of businesses were regulated under the current system, there may also be disquiet.
This option provides less certainty to industry as to legislative requirements and places the responsibility with medium and low risk businesses to apply best practice. Some larger in dustry members are d oin g this and will co ntin ue to do so to ac hiev e co mpetitiv e advantage.
This option would not enhance the competitiveness of Australian food exports produced by ‘low risk’ businesses where they are competing in international markets with products that are also promoted as being produced under HACCP-based food safety systems. Similarly, this option is not fully in step with international trends in regulating control of foodborne illness in the use of outcomes-based quality management systems which apply to the entire food supply chain.
Benefit to industry
Low and medium risk businesses would benefit through reduced government regulation under this option. However, many would have to meet industry standards for food safety due to marketplace demand.
If the existing system was used to regulate low and medium risk businesses, the current costs of compliance with outdated, prescriptive and inconsistent regulations would continue. This is estimated using data fromOvercooked: A Study of Food Compliance Costs for Small Businessto be around $1,640 per business excluding capital costs.
Impact on consumers
Some reduction in the incidence of foodborne disease would be expected by high-risk businesses adopting a preventative approach to food safety and implementing food safety programs. However, medium and low risk businesses would still contribute to outbreaks of foodborne illness. As such the cost to consumers would be higher for this option than the proposed food safety reforms.
Consumer confidence in the food supply may be harmed if only some businesses adopt a preventative approach to food safety. In addition the opportunity to reduce foodborne illness through a ‘paddock to plate’ approach to food safety as recommended by the Food Regulation Review would be lost.
Discussion
The benefits of this approach are:
• compliance costs for low-risk businesses would be reduced;
• the risk of foodborne illness would be reduced by expending resources in those segments where a higher risk exists; and
• it may represent minimum effective regulation if risks can be accurately determined.
The total economic costs of this option are significantly less than the proposed food safety reforms if low and medium risk businesses are no longer regulated. From a resource allocation perspective this option is lower. The question that remains, however, is the extent to which this option would reduce the costs of illness. There is no way of assessing this at present.
If high risk industry segments were targeted effectively then a high proportion of the reduction in the incidence and cost of foodborne